A journey through policy, progress, and being a patient by Kate Steadman

November 17, 2005

The Good, The Bad...

I promised more on the Medicare drug benefit this week so I think it's time to revisit. Fortunately my wonky contact at The Century Foundation, Leif Wellington Haase, has penned a "Good and Bad and Ugly" overview of the new benefit. We're optimistic people around here, let's start with highlights of the good:

• No state, even sparsely populated Alaska, has fewer than eleven drug plans. States such as California and New York feature more than forty choices.

• Premiums are on average about 14 percent lower than anticipated. Every state in the continental United States will have at least one drug plan with a monthly premium below $20.

• According to a recent study by PriceWaterhouseCoopers, beneficiaries with incomes of $14,500 or less (150 percent of the federal poverty level) will save 90 percent in out-of-pocket costs under the new coverage.

That's some serious relief for people who need it; it's also good to know everyone gets to choose from at least 11 plans. Of course, those choosing from 40 plans have a difficult road ahead of them. So what's the bad?

• Even though the efforts at educating beneficiaries have been strong, they have been plagued by troubling glitches. After the government released its online plan comparison feature last week—itself well behind schedule—it failed to include the prices plans will charge for specific drugs. This makes it difficult or impossible for older Americans to make educated choices about whether to join a plan, or which one to select.

• Medicare beneficiaries are still reluctant to sign up. A Gallup poll released in early October showed that over half of Medicare beneficiaries didn't plan to sign up for a prescription drug plan. Fewer than a quarter said that they would definitely join the program.

Beneficiaries not signing up is a bigger deal than meets the eye. That's because insurance companies are spending enormous amounts publicizing their plans, and insuring for drugs is not a very profitable way of doing business (one reason so many plans have dropped drug coverage in recent years.) If this plan fails and the various plans go under, it'll send shockwaves through the system, disrupting the costs of HMO-Medicare plans, and it could encourage even more companies to drop drug coverage. The immense complexity of the system is acting as a huge disincentive to sign up, and so far there are too few effective measures forming bridges over those troubled waters.

Unfortunately, it gets even worse:

• Beneficiaries who sign up for a drug plan after May 15, 2006 will face substantially higher premiums.

This is an essential point to realize about the new benefit -- if you are eligible and don't sign up, you are charged 1% more every month you don't sign up, for the rest of the time you're enrolled in Medicare part D. That means if you wait a year, you will pay 12% higher than the average plan cost. If premiums rise, so will the amount you're penalized. According to the Chicago Tribune, seniors who wait four years before signing up may end up paying almost 50 percent more for the rest of their lives. That's quite a penalty.

It's just another dimension that makes the new benefit a shameful piece of legislation. If you're going to penalize people for not signing up, make it easier, for God's sake. I'm still shaking my head that this bill ever passed...